Goldman Sachs Downgrades S&P 500 Year-End Target Price, Names Three Strategies to Mitigate Further Risk
1min read Goldman Sachs has revised its year-end target for the S&P 500 Index, lowering it from 6,500 to 6,200. This adjustment reflects heightened policy uncertainty, particularly regarding tariffs, and growing concerns over economic growth. Despite the downgrade, goldman sachs still sees an 11% upside potential for the index from its recent levels.
The S&P 500 has experienced a sharp downturn in recent weeks, shedding approximately 9% from its all-time high. A major contributor to this decline has been the performance of the Mag 7, whose prices have plummeted by 14%. This sell-off has led their price-to-earnings ratio to drop from 30x to 26x.
On Monday, S&P 500 suffered its steepest one-day drop since December 18, wiping out $4 trillion in market value. The index briefly approached correction territory following an announcement by U.S. President Donald Trump regarding new tariffs on Canada, though he later reversed his stance.
Goldman Sachs analysts, including David J. Kostin, ben Snider, and Ryan Hammond, attribute the recent downturn to three main factors:
Policy Uncertainty – The increased unpredictability surrounding tariffs has heightened market volatility.
Economic Growth Concerns – Investors are worried about a slowdown in economic activity.
Hedge Fund Positioning Unwind – A shift in institutional investor positioning has added to selling pressure.
Historical trends suggest that such market pullbacks often present attractive buying opportunities, particularly when economic and earnings growth remain intact. Over the past 40 years, the median intra-year decline for the S&P 500 has been around 10%, aligning closely with the recent drop.
In addition to lowering its S&P 500 target, Goldman Sachs also trimmed its 2025 EPS growth forecast from 9% to 7%. The updated EPS projections now stand at $262 for 2025 (previously $268) and $280 for 2026 (previously $288).
To navigate the current market turbulence, Goldman Sachs recommends three key investment strategies:
1. Focus on Non-Sensitive Stocks – Investors should seek out companies that are less affected by macroeconomic shifts, U.S. economic growth concerns, and tariff-related risks. This includes sectors with stable earnings and minimal exposure to market volatility.
2. Target Stocks Impacted by Hedge Fund Unwinding – Stocks that have been significantly affected by hedge fund repositioning and are trading at discounted valuations may offer strong rebound potential.
3. Invest in Stable Growth Stocks – For those concerned about the risk of an economic downturn, allocating capital to stocks with consistent growth trajectories can provide stability and resilience.
While the current downturn has raised concerns, Goldman Sachs remains cautiously optimistic. If economic conditions improve, market corrections of this nature could prove to be compelling entry points for long-term investors.